Order 2013-5-5

Served: May 6, 2013

 UNITED STATES OF AMERICA

 DEPARTMENT OF TRANSPORTATION

 OFFICE OF THE SECRETARY

 WASHINGTON, D.C.

Issued by the Department of Transportation

on the 6th day of May, 2013

ORDER RESELECTING CARRIER

Summary

By this Order, the Department is reselecting Pacific Wings L.L.C., d/b/a New Mexico 

Airlines (New Mexico Airlines) to provide subsidized Essential Air Service (EAS) at

Carlsbad, New Mexico, for the two-year period beginning June 1, 2013, for an annual 

subsidy rate of $1,397,081.1

Background

By Order 2011-4-19 (April 22, 2011), the Department reselected New Mexico Airlines to 

provide subsidized EAS at Carlsbad, through May 31, 2013. Under that Order, New 

Mexico Airlines provides 12 nonstop round trips each week between Carlsbad and 

Albuquerque (ABQ), utilizing single-engine, 9-passenger Cessna Grand Caravan (C-208B) 

turboprop aircraft for an annual subsidy rate of $1,350,253.

In anticipation of the end of the current rate term, the Department issued Order 2012-12-4 

(December 12, 2012), soliciting proposals to provide EAS at Carlsbad, NM, with subsidy 

support if necessary. In response to that request, we received proposals from three carriers: 

New Mexico Airlines (the incumbent), Boutique Air, and Sovereign Air, Inc. (Sovereign). 

The proposals are summarized below. The complete proposals are available at 

www.regulations.gov by searching for docket: DOT-OST-2002-12802.

New Mexico Airlines

New Mexico Airlines submitted a proposal to continue its existing service level at Carlsbad. 

Such service consists of 12 weekly nonstop round trips to ABQ, utilizing single-engine, 9-

 1 Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability of funds.

Essential Air Service at

CARLSBAD, NEW MEXICO

Under 49 U.S.C. 41731 et seq.

Docket DOT-OST-2002-12802
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passenger Cessna Grand Caravan (C-208B) aircraft. For this service, New Mexico Airlines 

would require an annual subsidy of $1,397,081.

Boutique Air

Boutique Air submitted a proposal with three service options. Under all three options, 

flights would be operated with single-engine, 9-passenger Pilatus PC-12 aircraft. The first 

option would provide 24 weekly nonstop round trips to ABQ and 12 weekly nonstop round 

trips to Dallas/Fort Worth International Airport (DFW) for an annual subsidy of $3,977,670. 

The second option would provide 12 weekly nonstop round trips each to ABQ and DFW. 

This option would require an annual subsidy of $2,965,492. The third service option would 

consist of 12 weekly nonstop round trips to DFW for an annual subsidy of $1,991,802. 

Sovereign

Sovereign submitted a proposal with four service options. The first option consists of 14-

weekly one-stop (Roswell) round trips to ABQ. Service would be provided with twinengine, 19-passenger Jetstream 31 aircraft. This option would require an annual subsidy of 

$1,422,426. The second service option would provide 14 weekly nonstop round trips to 

ABQ, also on Jetstream 31 aircraft. This option would require an annual subsidy of 

$1,410,533. Sovereign’s third option would provide 12 weekly nonstop round trips to ABQ 

on twin-engine, 12-passenger King Air-200 aircraft for an annual subsidy of $1,171,625. 

Sovereign’s final service option would provide 19 weekly one-stop round trips to ABQ, also 

with King Air-200 aircraft for an annual subsidy of $1,551,397.

Community Comments

On January 17, 2013, we solicited community comments regarding the carrier-selection 

decision at Carlsbad. On February 8, 2013, we received letters from the Carlsbad Air 

Service Committee and Carlsbad Mayor Dale Janway. Both letters express support for the 

selection of Boutique Air, specifically its first service option (24 weekly flights to ABQ and 

12 weekly flights to DFW). Mayor Janway’s letter also states that Boutique Air’s third 

service option (12 weekly flights to DFW only) would not work for Carlsbad as the 

community requires a connection to Albuquerque. Additionally we received several 

comments from citizens of Carlsbad supporting Boutique Air’s bid as well as several in 

support of renewing New Mexico Airlines’ service.

On February 8, 2013, we sent a request for additional comments to the community. Owing 

to the excessive levels of capacity and subsidy requirement for the option the community 

preferred, we asked them to narrow their consideration to Option 3 from Boutique Air 

(DFW service only) or New Mexico Airlines’ proposal. On February 20, 2013, we received 

a letter in response from Mayor Janway, stating that the community would be willing to 

accept Boutique Air’s Option 2, but could not accept either Option 3 or continued Service 

from New Mexico Airlines.

Decision

In evaluating the proposals we first looked to Sovereign. Sovereign does not currently have 

the requisite operating authority to perform its proposed service from either the Federal 

Aviation Administration or the Department. Therefore, we will not consider their proposal 

further. This leaves us with the proposals of Boutique Air and New Mexico Airlines. 
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When selecting a carrier, 49 U.S.C. § 41733(c)(1) directs us to consider four factors: (1) 

service reliability; (2) contractual and marketing arrangements with a larger carrier at the 

hub; (3) interline arrangements with a larger carrier at the hub; and (4) community views. In 

addition, The Consolidated Appropriations Act, 2008,2 provides that when selecting a 

carrier to provide EAS, the Department may consider the relative subsidy requirements, thus 

codifying a factor that we have considered since the inception of the program. 

While many of the community comments we received supported Boutique Air’s proposal, 

specifically because of its additional service to DFW, Carlsbad Mayor Janway stated that 

service only to DFW would not be suitable for Carlsbad. Boutique Air proposed two other 

service options that would provide service to both ABQ and DFW. However, of these, even 

the option with the lower subsidy requirement (Option 2) would require a more than 

doubling of the current annual subsidy and would be more than double New Mexico 

Airlines’ prospective annual subsidy. We are cognizant of the community’s belief that 

recent growth and business development in Carlsbad would support additional service to 

DFW. However, we cannot justify the additional expense of subsidizing service to a second 

hub. The core objective of the EAS program is to connect smaller communities to the 

national air transportation system, and New Mexico Airlines’ two round trips a day to ABQ 

fully meet that objective. Additionally, that capacity level will easily accommodate 

Carlsbad’s current passenger levels, which average about eight enplaned passengers per day. 

If the community believes that the demand exists for additional air service, we encourage 

them to reach out to airlines and make their case for additional unsubsidized service.

In his response to our request for additional comments, Mayor Janway cited the example of

Lewisburg, WV, where we subsidize EAS flights to two hubs (ATL and IAD) as evidence 

of why we should select a two-hub option in this case. While there are some similarities 

between the two cases, there are important differences that are not captured in the Mayor’s 

letter. When we requested proposals for the new EAS contract at Lewisburg (Order 2012-2-

7, February 9, 2012), we received only one response, from Silver Airways (Silver). Silver’s 

initial proposal was to operate 12 weekly (13 in the summer) nonstop round trips per week 

to ATL. As Silver was the only carrier to submit a proposal, the Department was able to 

negotiate their service proposal without raising any procedural issues. As a result of those 

negotiations, Silver agreed to split its proposed flights between ATL and IAD (rather than 

adding two times more capacity as Boutique Air seeks at Carlsbad) and agreed to a lower 

subsidy rate (as opposed to the significantly increased subsidy Boutique would require).3

New Mexico Airlines has been providing reliable EAS at Carlsbad since 2007 and has 

operated with an average completion factor in excess of 98%. New Mexico Airlines has 

established interline ticketing and baggage agreements with numerous partner airlines 

worldwide and can be found on all major global distribution systems and internet travel 

portals. New Mexico Airlines also has electronic interline ticketing with major domestic 

and international airlines, providing customers the ability to book travel between the EAS 

community, the hub and beyond, to other points in the national air transportation system. 

 2 Public Law 110-161.

3 See Order 2012-5-17, Docket: DOT-OST-2003-15553.
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After careful consideration of this matter, including the comments of local officials and 

citizens, the Department has decided to reselect New Mexico Airlines to provide EAS at 

Carlsbad. New Mexico Airlines will continue to provide 12 weekly nonstop round trips 

between Carlsbad and ABQ for an annual subsidy rate of $1,397,081. 

We shall make this selection at Carlsbad contingent upon the Department’s receiving 

properly executed certifications from New Mexico Airlines that they are in compliance with 

the Department’s regulations regarding drug-free workplaces and nondiscrimination, as well 

as the regulations governing lobbying activities.

Carrier Fitness

49 U.S.C. §§ 41737(b) and 41738 require that we find an air carrier fit, willing, and able to 

provide reliable service before we may subsidize it to provide EAS. New Mexico Airlines is 

subject to the Department’s continuing fitness requirements, and no information has come to 

our attention that would cause us to question the carrier’s fitness to provide EAS in this 

market at this time. We have contacted the Federal Aviation Administration, and it has 

raised no concerns that would negatively affect our fitness finding in this market. We 

therefore conclude that the carrier is reliable and remains fit to conduct the operations 

proposed here.

This Order is issued under authority delegated in 49 CFR Part 1.25a(b).

ACCORDINGLY,

1. We reselect Pacific Wings L.L.C., d/b/a New Mexico Airlines, to provide essential air 

service at Carlsbad, New Mexico, and establishes the subsidy rates, as described in 

Appendix C, for the period from June 1, 2013, through May 31, 2015;

2. The Department directs Pacific Wings L.L.C., d/b/a New Mexico Airlines to retain all 

books, records, and other source and summary documentation to support claims for 

payment, and to preserve and maintain such documentation in a manner that readily permits 

its audit and examination by representatives of the Department. Such documentation shall 

be retained for seven years from the service date of this Order or until the Department 

indicates that the records may be destroyed, whichever comes first. Copies of flight logs for 

aircraft sold or disposed of must be retained. The carriers may forfeit its compensation for 

any claim that is not supported under the terms of this Order;

3. We find that Pacific Wings L.L.C., d/b/a New Mexico Airlines, continues to be fit, 

willing and able to operate as a commuter air carrier and capable of providing reliable 

Essential Air Service at Carlsbad, New Mexico;
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4. This Docket will remain open until further Order of the Department;

5. We will serve copies of this Order on the Mayor and Airport Manager of Carlsbad, New 

Mexico, Pacific Wings L.L.C., d/b/a New Mexico Airlines, Boutique Air, and Sovereign 

Air, Inc.

By:

SUSAN L. KURLAND

Assistant Secretary for

Aviation and International Affairs

(SEAL)

An electronic version of this document is available in the Federal Docket Management 

System (FDMS) at http://www.regulations.gov
Appendix A

AREA MAP

This map is provided by Sabre® AirVisionTM Profit Essentials and is being used with express permission of the copyright holder, 

Sabre Airline Solutions®.
Appendix B
Appendix C

Page 1 of 2

Pacific Wings L.L.C., d/b/a New Mexico Airlines

Provision of Essential Air Service at Carlsbad, New Mexico

Summary of Service To Be Provided

Effective Period: June 1, 2013 through May 31, 2015.

Scheduled Service: 12 nonstop round trips a week to Albuquerque.

Aircraft type: Cessna 208B (9-seats).

Intermediate stops and 

upline service:

No service to any intermediate or upline points are contemplated under the 

terms of the carrier’s proposal; accordingly, no such service may be provided 

on subsidized flights without prior Department approval.

Timing of flights: Flights must be well-timed and well-spaced in order to ensure full 

compensation.

Annual compensation: $1,397,081

This rate assumes an annual completion factor of 98.2 percent. A 

compensation ceiling is to be applied per calendar week such that 

service above that ceiling in one week cannot make up for service 

shortfalls in another week.

Subsidy Rate per 

Flight:

$1,1401

Weekly Compensation 

Ceiling:

$27,3602

 1 Annual compensation of $,1,397,081 divided by 1,226 annual departures (24 weekly departures x 52 weeks x 

98.2% completion factor). 

2 24 flights per week multiplied by $1,140 per flight.
Appendix C

Page 2 of 2

NOTE:

The carrier understands that it may forfeit its compensation for any flights that it does not operate 

in conformance with the terms and stipulations of the rate order, including the service plans 

outlined in the order and any other significant elements of the required service, without prior 

approval. The carrier understands that an aircraft take-off and landing at its scheduled 

destination constitutes a completed flight; absent an explanation supporting subsidy eligibility 

for a flight that has not been completed, such as certain weather cancellations, only completed 

flights are considered eligible for subsidy. In addition, if the carrier does not schedule or operate 

its flights in full conformance with the order for a significant period, it may jeopardize its entire 

subsidy claim for the period in question. If the carrier contemplates any such changes beyond 

the scope of the order during the applicable period of these rates, it must first notify the Office of 

Aviation Analysis in writing and receive written approval from the Department to be ensured of 

full compensation. Should circumstances warrant, the Department may locate and select a 

replacement carrier to provide service on these routes. The carrier must complete all flights that 

can be safely operated; flights that overfly points for lack of traffic will not be compensated. In 

determining whether subsidy payment for a deviating flight should be adjusted or disallowed, the 

Department will consider the extent to which the goals of the program are met and the extent of 

access to the national air transportation system provided to the community.

If the Department unilaterally, either partially or completely, terminates or reduces payments for 

service or changes service requirements at a specific location provided for under this order, then, 

at the end of the period for which the Department does make payments in the stipulated amounts 

or at the stipulated service levels, the carrier may cease to provide service to that specific 

location without regard to any requirement for notice of such cessation. Those adjustments in 

the levels of subsidy and/or service that are mutually agreed to in writing by the Department and 

carrier do not constitute a total or partial reduction or cessation of payment.

Subsidy contracts are subject to, and incorporate by reference, relevant statutes and Department 

regulations, as they may be amended from time to time. However, any such statutes, regulations, 

or amendments thereto shall not operate to controvert the foregoing paragraph.

Funds may not be available for performance under this order beyond September 30, 2013. The 

Government’s obligation for performance under this order beyond September 30, 2013, is 

subject to the availability of funds from which payment for services can be made. No legal 

liability on the part of the Government for any payment may arise for performance under this 

order beyond September 30, 2013, until funds are made available to the Department for 

performance. If funds are not made available for performance beyond September 30, 2013, the 

Department will provide notice in writing to the carrier.

All claims for payment must be submitted within 60 days of the last day of service provided 

under this order.